Yesterday, Western Digital officially announced the second generation of their WD TV HD media player. In our review of the original device, we loved its ability to play back almost any video we tossed at it, but lamented its inability to handle encrypted media files. Since then, Western Digital has issued a series of firmware updates that improve format compatibility (including DivX), but the new WD TV Live adds new hardware features as well. Most notable is the addition of an Ethernet port to connect the WD TV Live to your home network. That means you can not only stream movies from your desktop PC or NAS boxes to the WD TV Live, but also get video, music, and photo content from the internet. We received a retail sample of the new system, and tested it to see if these new features are worth the $50 price bump.

Western Digital’s WD TV HD Media Player is missing two components commonly found in digital media players: a display and storage. What the device does have is two USB ports, HDMI and composite video outputs, digital and analog audio outputs, and the ability to play almost any digital media.

Since you provide the storage media, you can never fill up the WD TV. You plug the player into your TV and connect your USB drive or digital camera to the player; it then creates thumbnails for all the digital movies, photographs, and music it finds stored there. If you connect storage devices to both USB ports, the WD TV will index the contents of both drives as if they were one.

The device delivers much higher video resolution than most media players, all the way from 480i using the composite video port to 1080p using HDMI (576p, 720i, 720p, and 1080i are also supported via HDMI). The WD TV supports a host of video formats, codecs, and containers, including AVI, H.264, QuickTime, VOB, and Matroska. It does not, however, support DivX.